Eurasian Natural Resources Corp. (ENRC), the metals producer being probed by the U.K.’s Serious Fraud Office, slid to a one-month low in London trading after rejecting an offer to take the company private.
ENRC fell as much as 6.1 percent to 255 pence, the lowest intraday price since April 19, and was at 264.40 pence as of 9:53 a.m. local time. The stock has lost 42 percent of its value in the past year.
The independent committee set up by London-based ENRC’s board to evaluate the proposal from the company’s three founding shareholders and the Kazakh government, which together own 54 percent, said today it “materially undervalues” ENRC. The offer amounted to 175 pence in cash and 0.231 shares of Kazakhmys Plc (KAZ) for each share held, the committee said in a statement, valuing ENRC at about $4.96 billion at the end of last week.
“The low-ball offer from the consortium is likely an effort to give them more time as well as wearing down the minorities,” Liberum Capital Ltd. said in a note today. “Small upward revisions could be made to the cash portion but nothing significant as they may find it difficult to leverage up the target any more.”
The three ENRC founders -- Alexander Machkevitch, Patokh Chodiev and Alijan Ibragimov -- are seeking to take the company off the market five years after it sold shares in an initial offering in London. The SFO said April 25 it began its investigation over allegations of fraud, bribery and corruption relating to the company’s activities in Kazakhstan and Africa. ENRC said two weeks later that Deutsche Bank AG and Morgan Stanley quit as advisers.
The founders are raising $1.6 billion to fund the cash component of the buyout, and the government is offering its 26 percent stake in London-based Kazakhmys, according to people familiar with the matter who asked not to be identified because the information isn’t public.
Kazakhmys is being considered as part of the bidding group, the U.K.’s Panel on Takeovers and Mergers said in a statement today.
“Kazakhmys itself is not part of the consortium,” the company said separately. The Kazakhmys shares offered by the bidding group represent the entire shareholding of the government “and does not involve Kazakhmys issuing any new shares,” it said.
Kazakhmys doesn’t see its 26 percent holding in ENRC as a strategic investment and will consider any proposal made by the bidding group, it said. The copper producer will be offered $885 million and 77 million of its own shares for its ENRC shareholding, the people said. One of the people said Kazakhmys plans to cancel the 77 million shares it will get.
The Panel on Takeovers and Mergers agreed to extend to June 3 the deadline by which the group must either improve its offer or walk away, according to ENRC.
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